In the wake of the Technology selloff described below, this follow‑on analysis, published on February 19, 2026, explores settlement activity, sector rotation, and technical trends observed in the subsequent trading sessions.
Nasdaq Advisory’s Equity Surveillance practice maintains comprehensive coverage of trade settlement data across over 200 Technology companies and other major sectors through client and issuer partnerships. This depth of coverage, along with our experienced team of analysts, allows the team to share unique insight into how investors positioned around recent events, while also providing actionable information.
Deep Dive on Settlement Flows
Aggregated settlement activity from Nasdaq’s ~1,300 North American listed clients from February 6, 2026 to February 12, 2026 shows that the selling was largely coming from Institutional Investors in Industrials, Financials, Consumer Cyclicals and Healthcare sectors. While the investors were also scaling back on Technology names, the pace was much less than the prior week. The sell-off continued to stem from what has now been dubbed the “AI scare trade”, which initially moved from Software to Financials to logistics, as Algorhythm Holdings claimed its AI platform enables customers to scale freight volumes by 300% to 400% without adding headcount. The expansion of AI impacting traditional business models has led Institutional Investors to largely sell across the market. Hedge Funds/Fast Money and Retail Investors were seen taking in the supply in some of the impacted sectors. However, they were also seen cutting back across Technology, highlighting a continued trend of using profits in Tech as a source of funds for investing in other sectors. Index Investor activity stood out during the week as firms bought across the market.
When we dive further into market caps, we begin to see that selling large cap names was the primary focus of Institutional Investors, however most of the outflows in Technology were in small cap and mid cap names during the week. Most of the large cap supply was taken in by Hedge Fund/Fast Money and Retail Investors. They were also notable buyers of small cap and mid cap Healthcare names during the week.
Settlement Trends Across all Sectors: 2/6 – 2/13
Across the Tech mid-sectors, activity across investor types were focused to Semiconductors, Software & IT Services, Telecommunications and Computer/Phones & Electronics. Retail Investors were sellers of Telecommunications and Computers/Phones & Electronics during the week, with proceeds going towards supporting Software & IT Services. Hedge Funds/Fast Money were similar in that regard, having sold Semiconductors and Telecommunications, while buying Software & IT Services. Institutional selling remained concentrated to Software & IT Services during the week, while buying Semiconductors and Telecommunications during the week.
Settlement Trends within the Technology Sector: 2/6 – 2/13
Technical Analysis
The Software sub-sector, as represented by the iShares Expanded Tech-Software Sector ETF (IGV), has begun to see signs of stabilization over the past week. After closing at $82.46 on February 6, the ETF fluctuated, reaching an intraday high of $87.08 on February 10 (and a low of $79.71 on February 12) before slightly recovering to $82.77 by February 13. From a technical perspective, Software appears to have hit a double-bottom after failing to hit new YTD lows last week. It has now begun a slight pattern of higher lows with the psychological $80 level as one key area to watch for support in the coming week.
However, caution is warranted. Given the fact that RSI levels had hit severely oversold levels just one week prior, the recent recovery has been partially driven by seller exhaustion, a classic mean-reversion bounce and dip buying retail mentality. As it currently stands, RSI levels are on the border between what is traditionally considered “oversold”, although there has been improvement compared to the week prior. The previous underlying concerns regarding the “per-seat” crisis and agentic threat remain largely unchanged. Furthermore, multiple top individual holdings within IGV have continued to touch fresh 52-week lows.
Meanwhile, Semiconductors (as represented by VanEck Semiconductor ETF or SMH) continue to lead the Tech sector, driven by a "pick-and-shovel" AI thesis where hardware remains the primary beneficiary of increased infrastructure spending. Even though Semis came off massive outperformance to start the year, the spread between Semis and Software has continued to widen and hit a peak of 36% YTD on February 11th. SMH was able to bounce off its 50-day moving average with the ETF now only a few percentage points away from all-time highs.
SMH: VanEck Semiconductor ETF
IGV: iShares Expanded Tech-Software Sector ETF
50 DMA: 50 Day Moving Average
200 DMA: 200 Day Moving Average
RSI: Relative Strength Index (measured between 0-100, reading <30 is “oversold,” reading >70 is “overbought”)
ETF Flows
Investors have continued to trim exposure to the Technology Select Sector Fund (XLK), which leads YTD outflows at $2.1B, though flows showed early signs of stabilizing in the week ending February 13. The Consumer Discretionary Select Sector Fund (XLY) follows with $1.3B in YTD redemptions and continues to see consecutive weekly outflows. In contrast, the Energy Select Sector Fund (XLE) has attracted $3.8B in inflows, maintaining steady momentum through the first half of February.
Technology ETF flows during the same time pointed to a gradual easing of sector‑wide selling pressure. Software‑focused (IGV) was a clear standout, with strong inflows, as investors bought the dip following January’s weakness. Cloud‑oriented (SKYY) and diversified Tech funds such as (IYW) and (IGM) continued to post consistent weekly outflows, reflecting more selective positioning outside large cap Software. Semiconductor demand moderated from January, but continued to show underlying interest through mid‑February. The (SOXX) registered back‑to‑back modest inflows and SMH rebounded sharply from a $502M outflow on Feb 06 to a $1.40B inflow on Feb 13.
Published on February 12, 2026
The Nasdaq Equity Surveillance and Shareholder Analysis team has visibility into trade settlement across over 200 companies in the Technology sector and other major sectors through client and issuer partnerships. This depth of coverage allows the team to share actionable information and unique insight into how investors positioned around recent events.
Between January 28 and February 5, 2026, the Technology sector underwent a steep selloff. During that time, the S&P Technology index declined 8.2%. While a few factors were at play, AI disruption was the major impetus for the decline following Anthropic’s release of Claude plug-ins. As a result, the team observed the iShares Expanded Tech-Software Sector ETF (IGV) close down ~22% YTD as of February 6, 2026. Exacerbating the sell-off were spending concerns from Amazon and Alphabet earnings, as the hyper-scalers aggressively increased FY 2026 capex estimates. Finally, December 2025 Job Openings and Labor Turnover Survey (JOLTS) hit the lowest since September 2020, in addition to a weak Challenger jobs number on the macro front.
A Closer Look at Settlement Flows
Aggregated settlement activity from Nasdaq’s ~1,300 North American listed clients between January 30 and February 5, 2026 showed that selling in the Technology sector was driven by institutions, while also scaling back notably in the Financials sector. Hedge funds added exposure amid the downturn, with selling from Consumer Cyclicals and Healthcare sectors funding the purchases. Additionally, inflows were observed from index funds, with capital being injected into Consumer Cyclicals and Technology sectors. The Retail sector also purchased shares, providing support to the market amid a notable selloff. While net activity across sectors was limited, the investor group took advantage to buy-the-dip as markets declined.
Diving further into market caps, the majority of activity was among mid-cap and large-cap companies. Activity among small-cap companies was limited, with institutions and index funds emerging as the sellers. Some of the supply was taken in by hedge fund investors, while retail was seen as the largest buyers of small-cap Technology companies.
Settlement Trends Across Sectors
Across the mid-cap Technology companies, software and IT services stocks received the most attention. Hedge fund buying, institutional selling, and retail buying are the standout trends. We will be analyzing this data in each of the coming weeks and will be providing updates through various means.
Buyers and Sellers
Amundi and Janus were the two most notable institutional buyers of Technology companies during the previous week. Millennium and Citadel were the two most prominent buyers of Technology on the hedge fund front, with heavy buying of the dip in the Software sector.
Aggressive selling of Technology companies across some of the largest institutional investors, including J.P. Morgan Asset Management, Capital Arms, T. Rowe Price, and Fidelity. J.P. Morgan Asset Management was the most notable seller of both Semiconductor and Software companies.
Technical Analysis
The Software sub-sector, as represented by the IGV, has been in a technical downtrend and saw the index trade near last year’s liberation day lows. Technicians view IGV as a “falling knife,” without clear signs of when long-term stabilization will come. The index is trading below significant moving averages and recently experienced a “death cross” with the 50 DMA crossing below the 200 DMA at a steep angle.
With that in mind, relative strength index (RSI) reached its lowest reading in years (since 2011), which is a sign of an oversold indicator. This manifested itself in a relief rally on February 6, 2026, resulting in a higher finish for Software company stocks, despite lagging broader markets during the session.
The psychological $75 support level is a critical area of interest, representing a re-test of the prior cup-with-handle breakout from November 2023. IGV was more concentrated in large-cap companies than mega-cap-heavy indices compared to QQQ or XLK. This led to sharper drawdowns, as its top holdings, including Microsoft (-27% from peak), Salesforce (-48% from peak), and Oracle (-58% from peak), have faced significant selling pressure.
Meanwhile, Semiconductor companies have shown far more resilience. The sector, as represented by VanEck Semiconductor ETF (SMH) tested major support near the 50 DMA, after retreating from all-time highs reached in late January 2026. RSI levels rapidly retreated from overbought conditions of over 70 (reached on January 28 and 29, 2026). Despite the pullback, Semiconductor companies are still holding onto YTD gains of +11.5% as of Friday, February 6, 2026. The substantial outperformance on Friday was driven by a broader rally, and confirmation of a large AI spending spree from hyper scalers Amazon and Alphabet for 2026.
SMH: VanEck Semiconductor ETF
IGV: iShares Expanded Tech-Software Sector ETF
50 DMA: 50 Day Moving Average
200 DMA: 200 Day Moving Average
RSI: Relative Strength Index (measured between 0-100, reading <30 is “oversold,” reading >70 is “overbought”)
YTD Divergence Between IGV and SMH
Underperformance from the Software sector (IGV -22.0% YTD) versus the Semiconductor sector (SMH +11.5% YTD) represented a ~34% spread in just over a month. In terms of breadth, 87% of the IGV started 2026 trading negative, while 64% of the SMH traded positive.
Sell-Side Commentary
Sell-side reactions to the sector’s outsized losses were divided. On one hand, several analysts characterized the move as overdone and fundamentally unjustified, viewing the pullback as an opportunistic re-entry point. On the other, more cautious voices warned that the underlying pressures driving the decline were unlikely to abate, limiting near-term upside and keeping investors on the sidelines.
Earnings Recap
Technology stocks saw a broad pullback as investors collectively took a step back to digest how much AI enthusiasm and capital spending had already been priced in. While fundamentals largely held up, particularly across cloud and hyperscale, the market reacted negatively to guidance that pointed to sustained boosts in capex and longer payback periods. Some of the heavy hitters like Microsoft and Amazon were more pressured by investment intensity versus operating performance metrics. Incremental AI headlines, including rapid advancements from Anthropic, added to the uncertainty by reinforcing disruption across the Software sector, prompting multiple compression and systematic de-risking across growth exposures.
In short, the weakness felt more like positioning and capital discipline concerns rather than a deterioration in demand, with traders rotating out of crowded winners despite generally constructive results. Longer term, clearer evidence that these AI investments translate into durable revenue growth and margin expansion should help stabilize sentiment and provide a path for multiples to rebuild.
- Microsoft (MSFT) Q2 FY26 Earnings: Reported resilient cloud growth at ~39% and strong Copilot adoption, but capex guidance spiked meaningfully. Street reaction was muted/negative as investors focused more on ballooning infrastructure spend and Azure growth timing vs near-term monetization.
- Amazon (AMZN) Q4 2025 Earnings: Sales beat and AWS up ~24% YOY, but EPS slightly below estimates and notable capex guidance (~200B) overshadowed results. Shares sold off sharply as analysts flagged aggressive AI and cloud build-out, increasing margin pressure and raising ROI questions.
- Alphabet (GOOGL) Q4 2025 Earnings: Cloud revenue surged ~48% and EPS/revenue topped street expectations, yet guidance implied substantial 2026 infrastructure spend. Despite strong fundamentals, multiples softened as investors signaled caution on outsized capex and the timing of AI monetization.
- Meta Platforms (META) Q4 2025 Earnings: Ad revenue and AI efficiency gains helped meet estimates, with capex also climbing. Analysts credited Meta’s clearer monetization of AI spend for its relative outperformance in the beat reaction.
- Advanced Microchip Devices (AMD) Q4 2025 Earnings: Reported record revenue and earnings beats with strong data center and PC segments. Stock sold off sharply post-earnings as investors weighed slowing secular growth, lofty multiples, and rotation pressures.
- Qualcomm (QCOM) Q4 2025 Earnings: Beat on the top and bottom line but issued softer forward guidance and highlighted cyclical headwinds. Traders viewed the demand outlook, particularly around memory and mobile trends, as a cautionary signal.
Overall, positive guidance has far outpaced negative guidance, with companies having mixed reactions to guidance revisions given a high bar.
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